An offer in compromise is not an option in your situation.
The $8,941 in cancelled debt will not generate enough tax for the IRS to consider an OIC.
You should consider filing a Form 982 (Reduction of Tax Attributes Due to Discharge of Indebtedness) if you qualify for any of the exceptions to paying tax on cancelled debt.
Canceled, forgiven, and discharged debt is considered taxable income, unless it qualifies for an exclusion or an exception, defined below.
Normally the debt is reported on Form 1099-C. Make sure to enter your 1099-C in TurboTax so we can figure out it qualifies for an exclusion or an exception.
Tip: If a creditor is still trying to collect on your debt, it's not considered canceled, forgiven, or discharged, which in turn means there's nothing to report – even if the creditor sent you a 1099-C.
Exclusions
- Debt canceled in a Title 11 bankruptcy
- Debt canceled during insolvency (the amount exceeding your assets)
- Cancelation of qualified farm or real property indebtedness
- Cancelation of qualified principal residence indebtedness, better known as mortgage debt relief
If your debt qualifies for any of these exclusions, TurboTax will complete Form 982 and include it with your return. To prepare a form 982 you should use the CD/download version of TurboTax.
In order to the switch from online to CD/download. please see the following link: https://ttlc.intuit.com/questions/1901476-how-do-i-switch-from-turbotax-online-to-the-turbotax-softw...
Once you have done the above you can access the forms mode of your desktop program.
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